When advocacy crosses the line: nonprofits, elections and the law

Between the slams on President Obama, Democratic U.S. Rep. David Price and Democratic-sponsored health care reform, Jessica Anderson, deputy political director for the D.C.-based, conservative group Heritage Action for America, managed to insert a disclaimer.

"Heritage Action is a 501(c)(4), which means I'm allowed to say what I just said," Anderson announced. "Don't say that Francis said anything I just told you, because then you'll get in trouble."

It's March 2012, and Anderson, a speaker at the John W. Pope Civitas Institute's annual Conservative Leadership Conference in Raleigh, is referring to Civitas President Francis De Luca.

The disclaimer is key because Civitas, which is funded by the Pope Foundation, is a 501(c)(3) tax-exempt nonprofit organization. According to the tax code, 501(c)(3)s are prohibited from "directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office."

But as a 501(c)(4), Heritage Action is a "social welfare organization" that can engage in electioneering, provided the partisanship is not the group's primary activity.

Welcome to modern electioneering. Critics say tax-exempt "charities" on the right and the left exploit murky tax codes to achieve ideological goals.

"We all play under an unspoken agreement," says state Rep. Verla Insko, a nine-term Orange County Democrat. "I'm not surprised the public's losing faith, not just in its institutions in general but especially in the political process."

Nonprofit electioneering has been in the news recently because of a leaked memo originally attributed to the progressive 501(c)(3) Blueprint NC. The controversial memo, which has since been credited to left-leaning 501(c)(4) America Votes, lays out a blunt strategy to "eviscerate the leadership" of state Republicans such as Gov. Pat McCrory, House Speaker Thom Tillis and Senate Pro Tem Phil Berger.

Suggested tactics include video-taping Republican leaders and hiring private investigators, which prompted the GOP to call for investigations by the state Board of Elections and the Internal Revenue Service.

Democratic lawmakers such as Insko and Sen. Ellie Kinnaird, D-Orange, say it's a problem for left- and right-leaning nonprofits that skirt tax codes to avoid legal complications. One commonly used method is for nonprofits to argue they are providing voter education, not a partisan message.

If Republicans are concerned, they're not talking to INDY Week about it. Sen. Chad Barefoot, a Wake County Republican, did not return multiple phone calls on the subject this week, and Sen. Bob Rucho, an influential GOP leader from Mecklenburg County, hung up before he could be asked about it.

Civitas' website states its goal is to speed "conservative policy solutions" in North Carolina. Its annual conference is typically a gathering for influential leaders on the right. This year's scheduled speakers included U.S. House Reps. Renee Ellmers and George Holding, as well as Tillis and Bergerall Republicans.

Before joining Heritage Action, Anderson worked for Civitas in its get-out-the-vote campaign in North Carolina. Her 2012 speech on behalf of Heritage attracted no media attention, but her comments included an assertion that GOP election victories can be delivered with the help of groups such as Civitas, Heritage Action and Americans for Prosperity, another 501(c)(4) conservative advocacy group.

Anderson also joked that the state's GOP-drawn redistricting mapswhich are facing a legal challenge before a panel of three superior court judgesconstitute "heaven" for her and a "very good map for conservative Republicans."

Kinnaird says such nonprofit partisanship from both sides feeds the problem. "One of the things we have to realize is these are not nonprofits in the sense that a nonprofit was created to be," she says. "This is a big game everybody is playing and, unfortunately, it's a game we all have to play."

Kinnaird adds that the backlash to the America Votes memo is to be expected. "You need to think about what's going to happen when it gets into the hands of the wrong people," Kinnaird says. "Because it will. And you can get your base to work for you without having to use extreme language and threats."

IRS spokesman Mark Hanson declined to discuss specific cases or hypothetical tax code violations with the INDY, but the federal agency's website details forbidden activities for nonprofits such as Blueprint and Civitas.

Nonpartisan voter registration is acceptable, according to the IRS, but political campaign contributions or "public statements of position" in favor of or opposition to public office candidates would be a violation. It's unclear if that includes public statements made by a 501(c)(4) representative at a 501(c)(3)-hosted event, as is the case in Anderson's speech and the America Votes memo, which was reportedly distributed at a Blueprint gathering last December.

The IRS can revoke the tax-exempt status of a 501(c)(3) that breaks the rules, and may impose excise taxes on the organization.

Kim Strach, deputy director for the N.C. State Board of Elections, says her office leaves any tax rulings to the IRS, focusing instead on nonprofit election contributions.

Isaiah Castilla is an attorney for D.C.-based, left-leaning 501(c)(3) Alliance for Justice, which touts itself as an expert on the legalities of nonprofit advocacy.

The rules aren't clearly defined, he says: "It's basically a smell test. If it walks like a duck and talks like a duck, it's a duck."

In investigating potential nonprofit tax code violations, the IRS can make a "subjective" judgment based on multiple factors, Castilla says, including proximity to an election and the circumstances of a group's political actions.

A Civitas spokesman declined to discuss the matter with the INDY Monday. Blueprint NC Executive Director Sean Kosofsky wouldn't discuss specific complaints of improprieties, including those leveled at his organization, but he stressed that his group has heeded IRS restrictions on electioneering.

Blueprint's website states its goal is to push "progressive policies such as better access to health care, higher wages, more affordable housing, a safer, cleaner environment, and freedom from discrimination."

Kosofsky says his group will pursue those goals through lobbying and support for ballot measures, but it does not weigh in on candidate-centered elections.

"If it looks like you're trying to sway people one way or the other, the IRS is going to be all over that," he says.

That's true, Insko says. "I wish there was a cleaner way to do it, just for transparency purposes," she says. "It would be good if everyone wanted to do advocacy work openly."